Avoiding Common Estate Planning Mistakes

Bigstock-Urgent-Advice-Problem-Solving-53206399Knowing what the most common estate planning mistakes are is a great first step, but it does not do any good unless you also know how to avoid them.

The old saying that knowledge is power is only a half truth in many cases. You do not just need to know a fact. You also need to know how to use that fact to derive power.

This is the case in estate planning.

For example, you might know that it is desirable to avoid probate, but that is of little use unless you also know how to create an estate plan that will keep an estate out of probate. For the same reason it is important to not only know what common estate planning mistakes are but also to know how to avoid them.

A recent article by The Street entitled "How to Avoid the Most Common Estate Planning Mistake" discusses the most common mistakes and how to avoid them. Tips from the article include:

  • Updating Beneficiary Designations – People often fail to update the beneficiaries of their retirement accounts and life insurance policies, which leads to the wrong people getting the assets. Avoiding this mistake is as simple as filling out a form.
  • Communicating With Heirs – When your heirs do not know what to expect from your estate plan, it can lead to hurt feelings and anger. This can be avoided by telling people what to expect.
  • Creating Your Own Will – If you create your own will, you are likely to make mistakes in it. To avoid this problem, seek the assistance of an estate planning attorney.
  • Failing to Account for the Estate Tax – If you do not plan for the estate tax, then your estate might face a hefty bill that could have been avoided.

Fortunately, these potential miscues can be avoided by contacting a qualified estate planning attorney to guide you.

For more information about estate planning, please visit my estate planning website.

Reference: The Street (October 31, 2015) "How to Avoid the Most Common Estate Planning Mistake"


Types of Assets in Wealthy Estates

Bigstock-The-Way-To-Being-Wealthy-86254508Wealthy people can have all sorts of different assets. However, the majority of assets held by wealthy people when they pass away fall into a few basic categories.

For all of the attention it gets, a relatively small number of estates actually pay the federal estate tax. In 2014, fewer than 12,000 estate tax returns were filed with the IRS, and most of the estates that filed the returns did not owe any tax.

Thus, the estates that do pay the tax are those of the wealthiest of the wealthy in the country. By looking at the data on the returns where an estate tax was due it is possible to get an idea of what kind of assets wealthy people have.

As reported by the Wall Street Journal, in "When the Superrich Die, Here's What's in Their Wallets," the IRS has recently released that information for estate tax returns filed in 2014.

While the article breaks the data down into what the extremely wealthy few hold and what the just wealthy enough to pay the estate tax hold, there are things both groups have in common when they pass away.

Overwhelmingly, the most common asset is stock in publicly traded companies. The next most popular assets are closely held stock and bonds. Real estate, cash, retirement accounts and limited partnerships also make up a large percentage of the assets held by estates that are subject to the estate tax.

What this data reveals is that wealthy people have several different types of assets that need to be included in an estate plan.

It is important to treat each asset appropriately to limit the estate tax burden and to ensure that if any estate tax is owed, that the assets are liquid enough for the estate to pay it.

A qualified estate planning attorney can guide you through this process.

For more information about estate planning, please visit my estate planning website.

Reference: Wall Street Journal (October 30, 2015) "When the Superrich Die, Here's What's in Their Wallets"

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